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Research: Financials
Molten Ventures released its H124 trading update (to end-September 2023), with management expecting its NAV per share at c 735p, a c 5.7% decline from the end-March 2023 level as a result of a 3.6% negative fair value movement (excluding fx) across its portfolio. That said, management highlighted that the valuation environment is stabilising and that Molten’s portfolio performance remains resilient, with a good balance between growth (even if at a slower pace) and capital efficiency (with very limited exceptions). Molten’s shares currently trade at a 66% discount to NAV.
Molten Ventures |
NAV down c 6% in the first half of FY24 |
H124 trading update |
Listed venture capital |
13 November 2023 |
Share price performance
Business description
Analysts
Molten Ventures is a research client of Edison Investment Research Limited |
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Molten Ventures released its H124 trading update (to end-September 2023), with management expecting its NAV per share at c 735p, a c 5.7% decline from the end-March 2023 level as a result of a 3.6% negative fair value movement (excluding fx) across its portfolio. That said, management highlighted that the valuation environment is stabilising and that Molten’s portfolio performance remains resilient, with a good balance between growth (even if at a slower pace) and capital efficiency (with very limited exceptions). Molten’s shares currently trade at a 66% discount to NAV.
Period |
Plc cash* |
Gross portfolio |
NAV |
NAV/share |
Discount/premium |
03/22 |
78.1 |
1,531.5 |
1,433.8 |
929 |
(16) |
09/22 |
28.5 |
1,448.9 |
1,279.9 |
837 |
(64) |
03/23 |
22.9 |
1,370.7 |
1,194.1 |
780 |
(65) |
09/23*** |
23 |
1,300 |
N/A |
735 |
(69) |
Note: *Includes restricted cash but not funds held on behalf of EIS/VCT investors. **Calculated based on share price at respective period-end. ***Unaudited preliminary figures.
The £50m net negative portfolio fair value movement in constant currency in H124 includes £70m markdowns (in particular of one core and two emerging holdings), partly offset by £20m positive revaluations. Importantly, management noted that in the last 12 months, Molten’s portfolio companies raised £467m of capital (vs £2bn in the 12 months to end-September 2022), with 85% of the funding rounds being flat or up rounds. It is also worth noting that 97% of Molten’s investments are structured via preference shares and therefore include downside protections such as liquidation preferences (c 55% of its portfolio by fair value at end-March 2023 was valued at levels triggering the preference stack protection).
Over 80% of Molten’s core portfolio (representing 61.5% of it gross portfolio value at end-March 2023) has a cash runway of more than 12 months (in line with previous comments from Molten’s management), and over 50% of the core portfolio had a cash runway of more than 24 months. Therefore, Molten’s management reaffirmed its expectations in terms of funding requirement across its portfolio of c £20m in FY24.
Molten held £24m in cash at end-September 2023 (with another £40m available for investment through its managed EIS/VCTs) and an undrawn revolving credit facility with a capacity of up to £60m (subject to availability and certain drawing conditions). Amid continued soft VC markets (with longer due diligence processes extending deal timelines), Molten remains cautious in terms of new investments, with £17m deployed in H124 (below its £33m realisations in the period), with a further £35m invested by its managed EIS and VCT co-investment funds. Only £4m was invested in new and follow-on investments in H124, with the remaining £13m deployed through fund of funds and Earlybird. We understand that the H124 realisations included c £13m proceeds from a secondary sale of 10% of Molten’s Earlybird Fund VI investment announced earlier.
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Research: Healthcare
e-therapeutics reported H1 FY24 results (to end-July 2023), reaffirming its commitment to integrating its computational and hepatocyte biology expertise to develop short interfering RNA (siRNA) therapies. The key half-year development was the proof-of-concept (PoC) data for two preclinical assets for the treatment of cardiometabolic disease and haemophilia, with further updates forthcoming. We view these pipeline updates, especially in segments with increased interest, as positive. Management continues to strengthen its intellectual property (IP) position and has filed new patent applications to protect 11 inventions relating to its novel targets and siRNA constructs. In our view, the company’s cost-effective and flexible approach is a key differentiator, especially in light of the challenging funding environment for drug discovery. In H1 FY24, R&D spend was £5.3m, and the company expects an increase in H2 FY24 with further development of its AI capabilities and progression of its in-house preclinical pipeline. At end-July 2023, e therapeutics had a net cash position of £24.8m.